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The CEOs of Deutsche Telekom, Vodafone, Telefonica and Orange urged regulators to ease merger regulations
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Execs believe greater scale will help them better compete in various markets
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There's already a number of telecom deals in progress
MOBILE WORLD CONGRESS, BARCELONA – Consolidation of Europe’s telecoms market was back in the spotlight at MWC Barcelona 2024, with renewed pleas by the CEOs of the four biggest telco groups for merger regulations to be eased.
Timotheus Höttges from Deutsche Telekom (DT), Orange Group’s Christel Heydemann, José María Álvarez-Pallete from Telefónica and Margherita Della Valle from Vodafone took to the stage for a rare joint keynote on Monday and called for a “new deal” to help European telecoms regain momentum.
Della Valle, for example, was adamant that local in-market consolidation should become possible in Europe, also noting that it makes “no sense” for there to be “parallel 5G networks” everywhere.
Höttges, citing the merger of DT-owned T-Mobile US with Sprint as an example of a successful market consolidation, also criticized the fact that remedies imposed on mergers in Europe often mean a new, fourth operator has to be created.
Indeed, that is currently the case in Spain, where Orange and Masmovil were only able to gain approval for a new joint venture by selling spectrum to Digi Spain, allowing the latter to consider building its own mobile network in future.
Meanwhile, a recent white paper published by the European Commission has suggested that the authority will be more inclined to consider the scale of telecoms and cloud players in future discussions about market structure.
However, as noted by European telco association ETNO, operators still believe that creating adequate scale for European connectivity players will require a change in merger policy that enables in-market consolidation.
Deutsche Telekom and Vodafone have both demonstrated they are prepared to sell off assets in markets where they believe they are unable to compete.
During Monday’s keynote, Höttges said DT will exit markets if it believes the market structures are not working.
“You cannot ride on a dead horse. It’s impossible,” he said.
M&A frenzy
As things stand, a number of M&A efforts are currently underway in Europe including in Spain, where Orange and Masmovil hope to complete their merger transaction by the end of March.
Vodafone has been particularly active recently as it seeks solutions for sub-scale players in Italy, Spain and the United Kingdom.
For instance, the group has already agreed to sell its Spanish operations to Zegona in a deal that is expected to raise at least €4.1 billion (roughly $4.4 billion) in cash. This transaction is apparently on track to close in the first half of the 2024 calendar year.
In addition, Vodafone and CK Hutchison are attempting to merge their respective operations in the United Kingdom, although this transaction falls under the remit of the U.K.’s Competition and Markets Authority (CMA) and not the European Commission. In January 2024, both parties notified the CMA of their intention to merge Vodafone UK with Three UK, triggering phase one of the authority’s investigation.
Then this week, Vodafone was forced to confirm reports that yes, as speculated, it is in talks with Swisscom to potentially merge its Italian operations with Swisscom unit Fastweb. In a release, Swisscom said the two groups have agreed on a preliminary purchase price for Vodafone Italia of €8 billion (roughly $8.7 billion) on a cash and debt-free basis. However, it warned that there can be “no certainty that any transaction will ultimately be agreed.”
It’s also not entirely clearly what the European Union view would be of a Fastweb-Vodafone Italia combination, as both provide fixed and mobile services in the market. Notably, Fastweb has a 5G network-sharing agreement with Vodafone Italia rival WindTre, which has been attempting to sell its fixed-line grid, although so far without success.
Other recent European M&A includes Iliad’s acquisition of a 19.8% stake in Sweden’s Tele2, expanding the France-based group’s European presence. In addition, Telia Company has just reached regulatory approval from the Danish Competition Authority to sell Telia Denmark to Norlys, and expects the transaction to close in early April.
In France, meanwhile, Bouygues Telecom is in exclusive negotiations with La Poste to buy 100% of MVNO La Poste Telecom, which is currently 49%-owned by Bouygues rival SFR (or Altice France), for €950 million (roughly $1 billion).
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